RESTRICTED  WORLD  TRADE  
ORGANIZATION  WT/TPR/S/159 
23 January 2006  
 
(06-0211) 
Trade Policy Review Body  
   
 
  
 
TRADE POLICY REVIEW 
 
Report by the Secretariat 
 
DJIBOUTI 
 
  
 
This report, prepared for the first Trad e Policy Review of Djibouti, has been 
drawn up by the WTO Secretariat on its own responsibility.  The Secretariat has, 
as required by the Agreement establishing the Trade Policy Review Mechanism 
(Annex 3 of the Marrakesh Agreement Establishing the World Trade 
Organization), sought clarification from Djibouti on its trade policies and 
practices. 
 
Any technical questions arising from this report may be addressed to Mr Jacques 
Degbelo (022.739.5583) or Mr Carlos  Perez del Castillo (022.739.5336). 
 
Document WT/TPR/G/159 contains the policy statement submitted by Djibouti. 
 
 
 
Note: This report is subject to restricted circ ulation and press embargo until the end of the first 
session of the meeting of the Trade Policy Review Body on Djibouti. WT/TPR/S/159 Trade Policy Review 
Page ii 
 
 
CONTENTS 
 
  Page 
SUMMARY OB SERVATIONS ........................................................................................................... ..v 
 (1)  ECONOMIC ENVIRONMENT ...............................................................................................v  
 (2)  INSTITUTIONAL FRAMEWORK ...........................................................................................v  
 (3)  TRADE POLICY INSTRUMENTS .........................................................................................vi  
 (4)  SECTORAL POLICY ..........................................................................................................vii  
 (5)  TRADE POLICY AND TRADING PARTNERS .....................................................................viii  
I. ECONOMIC ENVIRONMENT.................................................................................................1  
 (1)  MAIN FEATURES OF THE ECONOMY ...................................................................................1  
 (2)  RECENT ECONOMIC DEVELOPMENTS .................................................................................4  
 (3)  TRADE AND INVESTMENT ..................................................................................................5  
  (i)  Trade in goods and services....................................................................................5  
  (ii)  Investment ..............................................................................................................8  
 (4)  OUTLOOK ...........................................................................................................................9  
II. TRADE AND INVESTMENT REGIMES...............................................................................10  
 (1)  INSTITUTIONAL FRAMEWORK ..........................................................................................10  
 (2)  POLICY FORMULATION AND IMPLEMENTATION ..............................................................11  
 (3)  TRADE POLICY OBJECTIVES .............................................................................................12  
 (4)  LAWS AND REGULATIONS ................................................................................................12  
 (5)  TRADE AGREEMENTS AND ARRANGEMENTS ...................................................................13  
 (i)  World Trade Organization....................................................................................13  
 (ii)  Regional agreements.............................................................................................14  
 (iii)  Bilateral agreements and arrangements................................................................16  
 (iv)  Other agreements and arrangements.....................................................................17  
 (6)  INVESTMENT REGIME ......................................................................................................18  
 (7)  TRADE -RELATED TECHNICAL ASSISTANCE .....................................................................22  
 (i)  Implementation of agreements, tr aining, policy formulation, and 
negotiations...........................................................................................................23  
 (ii)  Supply-side constraints.........................................................................................24  
 (iii)  Integration of trade into development strategies ..................................................24  
III. TRADE POLICIES AND PRACTI CES BY MEASURE........................................................26  
 (1)  GENERAL REMARKS .........................................................................................................26  
 (2)  MEASURES DIRECTLY AFFECTING IMPORTS ....................................................................26  
 (i)  Registration, documentation and procedures........................................................26  
 (ii)  Customs duties, other taxes and levies .................................................................28  
 (iii)  Duty and tax concessions .....................................................................................34  
 (iv)  Rules of origin ......................................................................................................35 Djibouti WT/TPR/S/159 
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Page 
 
 (v)  Prohibitions, quantitative restrictions and import licences...................................35  
 (vi)  Anti-dumping, countervailing and safeguard measures .......................................35  
 (vii)  Standards and other technical requirements .........................................................36  
 (viii)  Government procurement.....................................................................................38  
 (ix)  Other measures .....................................................................................................39  
 (3)  MEASURES DIRECTLY AFFECTING EXPORTS ....................................................................39  
 (i)  Registration and documentation ...........................................................................39  
 (ii)  Export taxes..........................................................................................................39  
 (iii)  Export prohibitions, restri ctions and licences.......................................................39  
 (iv)  Voluntary export restraint.....................................................................................39  
 (v)  Free zones.............................................................................................................39  
 (vi)  Export subsidies, export pr omotion and financing ...............................................40  
 (4)  MEASURES AFFECTING PRODUCTION AND TRADE ...........................................................41  
 (i)  Incentives..............................................................................................................41  
 (ii)  Competition policy and price controls..................................................................42  
 (iii)  State enterprises and privatization........................................................................42  
 (iv)  Protection of intellectual property rights ..............................................................46 
IV. ANALYSIS OF TRADE POLICY AND PRACTICE BY SECTOR ......................................48  
 (1)  OVERVIEW .......................................................................................................................48  
 (2)  AGRICULTURE , LIVESTOCK , FISHING AND RELATED ACTIVITIES ....................................48  
 (i)  Policy by type of product......................................................................................49  
 (3)  MINING AND ENERGY ......................................................................................................52  
 (i)  Overview ..............................................................................................................52  
 (ii)  Mining ..................................................................................................................53  
 (iii)  Energy...................................................................................................................55  
 (4)  MANUFACTURING ............................................................................................................58  
 (5)  SERVICES .........................................................................................................................59  
 (i)  Financial services .................................................................................................59  
 (ii)  Telecommunications and postal services..............................................................62  
 (iii)  Transport...............................................................................................................64  
 (iv)  Tourism.................................................................................................................69  
REFERENCES ..................................................................................................................... .................71 
APPENDIX TABLES................................................................................................................ ............73 
 
 WT/TPR/S/159 Trade Policy Review 
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CHARTS 
Page 
I. ECONOMIC ENVIRONMENT.................................................................................................1  
I.1 Exports of goods, 1990-2002................................................................................................ ......6 
I.2 Imports of goods, 1990-2002................................................................................................ ......7 
I.3 Origin of goods, 1990-2003................................................................................................. .......8 
III. TRADE POLICIES AND PRACTI CES BY MEASURE........................................................26  
III.1 Breakdown of applied MFN duties, 2005.................................................................................30 
III.2 Escalation of duties, 2005............................................................................................... ..........32 
TABLES 
I. ECONOMIC ENVIRONMENT.................................................................................................1  
I.1 Main economic indicators, 2000-2004........................................................................................ 1 
I.2 Balance of payments, 2000-2004............................................................................................. ...5 
II. TRADE AND INVESTMENT REGIMES...............................................................................10  
II.1 Criteria and benefits under the Investment Code, 2005............................................................18 
II.2 Free zone regimes, May 2004............................................................................................... ....21 
III. TRADE POLICIES AND PRACTI CES BY MEASURE........................................................26  
III.1 Breakdown of MFN rates, 1999 and 2005................................................................................29 
III.2 Brief analysis of the MFN tariff, 2005................................................................................... ...30 
III.3 Surcharges applied in 2005............................................................................................... ........33 
III.4 State-owned enterprises, September 2005 ................................................................................44  
IV. ANALYSIS OF TRADE POLICY AND PRACTICE BY SECTOR ......................................48  
IV.1 Mining titles............................................................................................................. .................53 
IV.2 Salt production, 1998-2004................................................................................................ .......54 
IV.3 Electricity rates, August 2005............................................................................................ .......56 
IV.4 Average interest rate on loans, 2001, 2002 and 2004 ...............................................................60 
IV.5 Prudential ratios, 2005 ................................................................................................... ...........61 
IV.6 Telecommunications:  basic indicators, 1996-2004..................................................................63 IV.7 Trend in port activities, 1999-2003....................................................................................... ....66 
APPENDIX TABLES 
II.
 TRADE AND INVESTMENT REGIMES  
AII.1 Main trade laws and re gulations in force, 2005 ........................................................................75 
III. TRADE POLICIES AND PRACTICES BY MEASURE  
AIII.1 Import duties by HS Chapter, 2005 ....................................................................................... ...77 
 
 Djibouti WT/TPR/S/159 
 Page v 
 
 
SUMMARY OBSERVATIONS 
 (1) E
CONOMIC ENVIRONMENT  
1. The economic reforms undertaken by 
Djibouti following its civil war (1991-1994) 
have enabled the country to stabilize its economy, with a growth rate of 2 per cent in 2001, 3 per cent in 2004, and an estimated 3.2 per cent in 2005.  The reforms, together 
with payments by the military troops stationed 
in Djibouti (5.6 per cent of GDP in 2004), have substantially reduced  the budget deficit.  
Prudent monetary management based on the currency board principle and the stability of the Djibouti franc pegged to the US dollar 
have helped keep inflatio n below 3 per cent. 
2. With a per capita GDP estimated at 
US$742 in 2004, Djibouti is a least developed country.  Its official external debt amounted to US$406.7 million at the end of 2004.  Djibouti 
does not yet qualify for debt reduction under 
the Heavily Indebted Poor Countries (HIPC) initiative.  The country's very high rate of unemployment (close to 60 per cent) is one of the Government’s main co ncerns.  The size of 
the informal sector highlights the importance 
of subsistence activities for a significant 
portion of the unemployed population. 
3. Djibouti's chronic external current 
account deficit is chiefly due to the low rate of cover of imports of goods by exports because 
of very limited domestic production.  On the 
other hand, the rise in the services account surplus, official transfers and net capital flows have enabled Djibouti to achieve an overall positive balance and to increase its gross 
official reserves since 2000.  The sharp 
upward trend recently observed in foreign direct investment (FDI) stems chiefly from the United Arab Emirates' involvement in the construction of the port at Doraleh and from privatization operations.  France and 
Switzerland are Djibouti's other sources of 
FDI.  The country's capacity to attract FDI is still limited, however, by the high cost of energy, water, telecommunications and imported raw materials;  the lack of skilled labour;  and conflicts and insecurity in the 
Horn of Africa. 
4. The services sector (dominated by port 
activities) accounts for some 87 per cent of 
Djibouti's real GDP, with a marginal share 
for each of the other sectors;  mining (mainly salt), energy and water together represent 9 per cent, and agriculture accounts for 3 per cent.  The lack of diversification renders 
Djibouti particularly vulnerable to shocks 
affecting Ethiopia, which is the leading destination for its exports of salt and the main beneficiary of its port services. 
5. Re-exports chiefly to Ethiopia and to a 
lesser extent to Somalia  have accounted for 
close to 80 per cent of Djibouti's total exports 
since 2000.  Non-iodized salt is the major export product.  The share of manufactures and fisheries has remained very low, despite the Government's commitment to promoting 
non-traditional exports.  There has been little 
change in the structure of imports, dominated by food products, hydr ocarbons, khat (a 
hallucinogenic substance) and manufactures.  Ethiopia is the major destination for Djibouti's exports, the EU being the primary source of 
imports.  Trading partners such as the United 
Arab Emirates and the other COMESA countries have recently  taken on a more 
significant role. 
(2) I
NSTITUTIONAL FRAMEWORK  
6. The Constitution of the Republic of 
Djibouti, adopted by referendum on 4 September 1992, embodies the principle of the primacy of international legal instruments signed and ratified by Djibouti, including the 
WTO Agreements, over internal legislation.  
According to the precedence of rules, the Constitution is followed, in descending order, by basic laws, ordinary laws, decrees, and orders.  The ministries responsible for foreign trade and finance draw up the Government's 
trade policy, in cooperation with other 
relevant government bodies in the areas concerned.  The private sector is consulted on an ad hoc basis. WT/TPR/S/159 Trade Policy Review 
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7. Djibouti views trade as a key to social 
and economic development and to poverty reduction.  It hopes to fully play its role as a regional hub once construction of the port at 
Doraleh has been completed.  Through the 
free zone that is currently being set up, Djibouti expects to attract more foreign investment and to promote job growth and diversification of its exports. 
8. Djibouti is an original member of the 
WTO and grants at least MFN treatment to all of its trading partners.  It has not signed any of the WTO’s plurilateral agreements.  One of Djibouti's major expectations from participating in the revised Integrated 
Framework is the streamlining of its trade 
policy into its development strategy;  a diagnostic study of the country has been carried out to that end.  The extent of Djibouti's integration in the multilateral 
trading system remains limited, however, and 
it has difficulty in implementing WTO Agreements such as the Customs Valuation Agreement and in meeting its notification obligations.  It still has considerable needs for trade-related technical assistance, not only in 
these particular areas but also in matters 
pertaining to trade policy formulation, trade negotiations, technical regulations, and the streamlining of trade into development strategies. 
9. Djibouti is a member of the Common 
Market for Eastern and Southern Africa (COMESA), the Intergovernmental Authority on Development (IGAD) and the African Union (AU).  It enjoys non-reciprocal 
preferential access to th e EU market under the 
Cotonou Agreement and the “Everything But Arms” initiative;  to the US market under the African Growth and Opportunity Act (AGOA);  and to the markets of other industrialized countries under the General System of 
Preferences. 
(3) T
RADE POLICY INSTRUMENTS  
10. The absence of domestic production of 
goods has so far justified the lack of a customs tariff stricto sensu.  However, the internal consumption tax (TIC), introduced primarily 
for fiscal reasons, serves a very similar purpose, as Djibouti's limited local production is generally TIC-free.  The TIC is solely ad 
valorem and comprises six rates:  0 , 5 , 8 , 
10 , 20 and 33 per cent.  The simple arithmetic average of these rates was 28.2 per cent in 2005, with mixed escalation.  The coefficient of variation of around 0.3 indicates low 
dispersion of rates.  The modal rate (the most 
common) is 33 per cent and applies to some 70 per cent of the total number of tariff lines. 
11. Non-agricultural products (WTO 
definition) receive the highest protection, with an average rate of 29.1 per cent, compared 
with 22.5 per cent for agricultural products.  
The International Standard Industrial Classification (ISIC, Revision 2) indicates a lower average TIC in agriculture (20.9 per cent) and manufacturing (28.6 per cent) than 
in the mining sector (30.6 per cent).  Imported 
products may also be subject to a general solidarity tax, surcharges (ad valorem and standing), a levy, a business licence fee, and a special solidarity tax.  Even as part of the COMESA free-trade z one, Djibouti does not 
grant import preferences to any country.  A tax 
of DF 500 per tonne is levied on exports of salt. 
12. During the Uruguay Round, Djibouti 
finished binding all its tariff rates.  It has 
bound its duties solely at ad valorem rates 
ranging from 0 to 450 per cent, with a simple arithmetic average of 41.8 per cent (52.4 per cent for agricultural products and 40 per cent for other products);  97 per cent of the lines 
have been bound at a ceiling rate of 40 per 
cent;  three lines have been bound at the ceiling rate of 450 per cent;  and only 67 lines have been bound at the 0 per cent rate.  Nevertheless, for 21 tariff lines, the applied rates are higher than the bound rates. 
13. Import prohibitions are generally 
governed by the international conventions to which Djibouti is party.  The only products specifically banned for import are right-hand drive vehicles and non-biodegradable plastic 
bags.  For health reasons, certain products Djibouti WT/TPR/S/159 
 Page vii 
 
 
may not be imported without the approval of 
the Ministry responsible for health.  Importation of products such as explosives or weapons requires prior authorization from the 
relevant authorities.  The import and 
marketing of khat is regulated.  Djibouti has no anti-dumping, countervailing or safeguard legislation.  The export of timber and coral is prohibited. 
14. Two products (salt, and packaged and 
bottled mineral waters) are subject to technical regulations;  measures are being taken in order to promote standardization and quality control activities.  Djibouti is a member of the International Plant Protection 
Convention and the African Union’s Inter-
African Phytosanitary Council (IAPSC).  Goods and services such as medicines, "common bread", water, electricity, telecommunications, postal services and urban 
transport are subject to price control.  
Djibouti is considering introducing legislation on competition.  The COMESA is in the process of establishing  a regional competition 
policy. 
15. A National Agency for Investment 
Promotion (ANPI) was set up in 2001 in order 
to administer the Investment Code, which provides for a number of incentives that are still little used.  A new law on free zones was adopted in 2004, aimed at reorganizing the 
free zone regime.  Jebel Ali Free Zone 
International is in charge of running the new free zone.  Djibouti’s government procurement legislation gives a preferential margin of up to 15 per cent (of the price) to local suppliers. 
16. Following the adoption of the law on 
privatization in 1996, two State-owned enterprises (Pharmacie de l'indépendance and the Djibouti Sheraton hôtel) were privatized and three (port, airport and fishing port) were the subject of a concession.  However, three 
new State-owned enterprises were created.  
Djibouti's industrial property legislation, covering only trademarks and service marks, is obsolete and outdated.  A draft industrial property law is currently being prepared, with  technical assistance from the WIPO.  
Copyright and related rights are protected under a law dating from 1996.  Djibouti has no legislation on the protection of new plant 
varieties. 
(4) S
ECTORAL POLICY  
17. Djibouti has an almost exclusively 
services-oriented economy and is a net exporter of services.  The services sector is 
dominated by port activities.  The Government 
intends this sector to play a leading part in its poverty reduction strategy.  Completion of the ambitious Doraleh project should contribute towards that goal by strengthening Djibouti’s position as a regional hub.  The ongoing 
privatization programme also targets key 
subsectors, such as telecommunications and rail transport services, and electricity;  transfer to the private sector should revive these subsectors and improve the 
competitiveness of goods and services 
requiring their intensive use. 
18. Djibouti’s commitments under the 
General Agreement on Trade in Services (GATS) are restricted to certain postal and courier services;  hotel and restaurant 
services;  recreational, cultural and sporting 
services (underwater diving centres); and professional telecommunications systems engineering services. 
19. Industrial (non-iodized) salt is the 
only mining resource currently being 
exploited, and production is mostly for export.  However, TIC rates in the mining sector (ISIC definition) are extremely high, standing at an average of 30.6 per cent.  This is one of the 
sectors (along with perlite and gypsum) that 
present a potential for the development of non-traditional exports.  Manufacturing has so far been limited to the production of non-alcoholic beverages and thus remains marginal.  Nevertheless, three new State-
owned enterprises (a cement works, a marble 
works and a mineral water production company) are being set up.  The average TIC in the manufacturing sector is 28.6 per cent. WT/TPR/S/159 Trade Policy Review 
Page viii 
 
 
20. Djibouti is a net importer of 
agricultural products generally and food products in particular.  Agriculture is highly dependent on natural conditions, but 
Djibouti's livestock and fisheries potential is 
as yet largely under-exploited.  In 2005, the average TIC in the agricultural sector was 22.5 per cent, compared with 24.6 per cent in 1999. 
(5) T
RADE POLICY AND TRADING 
PARTNERS  
21. The reforms undertaken by Djibouti 
should enable the country to streamline its trade regime and prepare for its full participation in the COMESA customs union.  
The ultimate objective is to enable Djibouti to 
make better use of its comparative advantages, first in a regional and then in a multilateral context, by diversifying both its production of goods and services and its exports. 22. In the short and medium terms, the 
ongoing reforms and the entry into operation of the port at Doraleh and most of the free zone companies should boost Djibouti’s 
economic growth at increasingly higher rates.  
The better allocation of resources that would result from the reform process (including structural reforms) and investment flows should contribute to reducing the 
unemployment rate in the economy. 
23. In order to give the reforms every 
chance of succeeding and to show investors that the Government is firmly committed to implementing the measures adopted, it is essential that these be followed by multilateral 
commitments.  Such commitments should 
strengthen the credibility of the reform process and the predictability of Djibouti’s trade regime.  The international community could contribute to the successful outcome of these 
reforms by according special attention to 
Djibouti’s technical assistance needs.